Jasa Merin (Malaysia) Sdn. Bhd.

Published: 21 July 2009
Source: Business Times

SILK to complete AQL buy this year

HIGHWAY concessionaire SILK Holdings Bhd will complete the acquisition of an oil and gas services company by the fourth quarter of the year as it seeks to diversify its revenue stream.

SILK, formerly known as Sunway Infrastructure Bhd, will buy AQL Aman Sdn Bhd, which owns shipowner Jasa Merin (Malaysia) Sdn Bhd.

By purchasing AQL, SILK hopes to generate cash flow and income to get out of its financially troubled status of Practice Note 17 by the year-end.

"Because of the delay in completing this transaction, we can't take into account the profit contribution from this new acquisition for our current fiscal year ending July 31," SILK executive chairman Datuk Mohammed Azlan Hashim told reporters after its extraordinary general meeting (EGM) in Kuala Lumpur yesterday.

The EGM reconvened yesterday after an adjournment in April due to concerns raised by a SILK director who also sits on the board of Cerah Sama Sdn Bhd, which in turn owns 14.16 per cent of SILK.

Subsequently, Ahmad Ishak Haron, who is a non-independent and non-executive director, resigned from the board as Cerah Sama felt that the group should remain focused on its infrastructure business and not venture into oil and gas services.

At the EGM, all five resolutions (four ordinary and one special) conducted by polling were passed.

One of the ordinary resolutions was to fully acquire AQL for RM94 million (including assumption of RM6.53 mil liabilities), to be paid for by issuing 175 million shares and RM43.75 million redeemable convertible unsecured loan stocks-B.

Jasa Merin executive director Johan Zainuddin Dzulkifli said its net profit in the financial year ended December 31 2008 was RM14 million.

"Hopefully, we can do better this year as our fleet is expanding and cost is being contained," he said.

Jasa Merin's fleet comprises four straight supply vessels and eight anchor handling tug vessels, out of which it owns 10.

"The two vessels that we charter from third parties are for deep water. By 2012, we will have four deep-water vessels and we are building two for shallow waters," said Johan, who is also a SILK non-independent and non-executive director.

Jasa Merin expects to own 16 vessels by 2012.

While SILK is optimistic that profits from its new acquisition will boost the group's portfolio, Azlan said it will take another three to four years for a complete turnaround.

"The group's consolidated accounts will be a loss because of accounting losses from our highway business, which has a long gestation period," he said.

He added that cash coming in from its highway operations was being used to service loans under its debt restructuring plan.

"The highway has got value, but we cannot tap the cash for now. We are seeing traffic revenue increasing because more cars are coming through as the traffic volume is some 100,000 per day," Azlan said.

Turnover from the oil and gas unit and the highway business is RM100 million and RM40 million respectively.